Brutal: Consumer confidence plunges almost 15 points in August, back to April 2009 levels

posted at 9:30 pm on August 30, 2011 by Allahpundit

The Conference Board Consumer Confidence Index®, which had improved slightly in July, plummeted in August. The Index now stands at 44.5 (1985=100), down from 59.2 in July. The Present Situation Index decreased to 33.3 from 35.7. The Expectations Index decreased to 51.9 from 74.9 last month…

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook. The index is now at its lowest level in more than two years (April 2009, 40.8). A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade. Consumers’ assessment of current conditions, on the other hand, posted only a modest decline as employment conditions continue to suppress confidence.”…

Consumers’ short-term outlook deteriorated sharply in August. Those expecting business conditions to improve over the next six months decreased to 11.8 percent from 17.9 percent, while those expecting business conditions to worsen surged to 24.6 percent from 16.1 percent. Consumers were also more pessimistic about the outlook for the job market. Those anticipating more jobs in the months ahead decreased to 11.4 percent from 16.9 percent, while those expecting fewer jobs increased to 31.5 percent from 22.2 percent. The proportion of consumers anticipating an increase in their incomes declined to 14.3 percent from 15.9 percent.

There’s a glimmer of good news: More people now say that they plan to spend soon on big-ticket items like cars and major appliances, so that might be a shot in the arm for unemployment. If it’s true that the debt-ceiling standoff and S&P downgrade are weighing on confidence levels, then that effect should recede soon too. The extreme volatility on Wall Street this month also freaked people out, I’m sure, and that’s abated for now. We’re one eurozone wobble away from another panic cycle, but as long as things seem relatively stable there, I assume these numbers will rebound a bit next month — barring the arrival of the long-dreaded double dip, of course. Which may already be upon us.

Consumer confidence is the ultimate measure of how voters “feel” about the economy so it’s a natural metric to look at during primary season to see how comfortable the incumbent is. Ace has a post up noting the similarly grim new numbers from the Michigan index of consumer sentiment and the fact that the average index on election day for incumbents who lost was 74.8. (For incumbents who won reelection, it was 95.9.) The current index is … 55.7. I tried to find similar numbers for consumer confidence and came up with this list tracking the CC index for the month of October in every year dating back to 1977. The lowest it’s ever been was 38.8 in 2008, right after the financial crisis, and Obama stomped the candidate of the incumbent party in the election the next month. If you toss that number out on grounds that it followed an extraordinary economic event, the next lowest CC index in a presidential year was 1992, when it was 54.6. Again the incumbent party lost badly as Clinton ousted Bush 41. The index isn’t foolproof — in 2000 it was a stratospheric 135.8 and Gore lost to Bush anyway — but not only is O deep in the danger zone , he’s been stuck there for almost his entire presidency. You can view the monthly CC numbers for his first two and a half years here. The index finally nudged above 60 and held there during the first half of this year, but it’s declined steadily for four straight months to the point where we’re now back almost to the beginning of his presidency. Essentially, it’s the answer to the “Are you better off than you were four years ago?” question in graph form. Devastating. Not irreversible, but devastating.

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Consumer confidence swings wildly month to month. I really can’t put much stock in these numbers. All it tells me is that Americans have the attention span of a gnat and change their views on the economy every week based on what Katie Couric and Charlie Gibson is telling them.

If she doesn’t hop in this weekend, than she will just be a deal maker, and a power broker.
Her time is basically, has been up for several weeks.
She would be smart just to negotiate a deal for a cabinet position…

If she doesn’t hop in this weekend, than she will just be a deal maker, and a power broker.
Her time is basically, has been up for several weeks.
She would be smart just to negotiate a deal for a cabinet position…

It’s almost as if a bunch of Americans woke up in early August and figured out that we have a dork Hawaiian socialist in the White House, who doesn’t have a single clue about economics or the economy and plays golf with Marxists, racists, and former street gang members.

If she doesn’t hop in this weekend, than she will just be a deal maker, and a power broker.
Her time is basically, has been up for several weeks.
She would be smart just to negotiate a deal for a cabinet position…

right2bright on August 30, 2011 at 10:01 PM

Just a question for fairness sake. If it is not too late for Christie, per many people, to still jump in or say Paul Ryan who may have announced a week ago and it would have been ok or people keep talking Rudy as well etc. Why is it she is the only one who has passed her moment to announce? I understand you are still giving her until this weekend but it seems most others do not but allow others more time. Not sure that is really a good question as it is more of an observation on my part.

The economy isn’t going to stabilize for a while. We’ve got a lot of economic data this week, and so far it’s been bad news all week. The market has shrugged the continuing bad news off, primarily because it figures that with the news getting worse and worse in the economy, the Fed Bank will have no choice but to do another round of quantitative easing. And they may be right because a vocal critic in the Fed Bank has signaled support, should the economy sink further.

During the last FOMC meeting, we learned that the number of dissenting hawks at the Fed has increased to a whopping 3. Well, make that 2 after Minneapolis Fed’s Kocherlakota just basically stuck his tail between his legs. To wit: “the disinflationary pressures of 2010 should soon reappear in the form of a sharp decline in current and expected core PCE inflation rates. In that eventuality, increasing policy accommodation might well be appropriate.” One dissenter down, two to go.

This is keeping the markets positive, as everyone’s trying to get on the ground floor for same market levitation that took place a year ago when QE2 was enacted. Ironically, however, as long as the market’s up, the Fed has a hard time justifying more easing, because they need a strong deflationary signal to do so. Which brings us to this Friday’s NFP numbers. Some are whispering that we may, in fact have a net job loss. If that happens, that could send the market sharply lower. The ADP numbers are tomorrow, and jobless claims are on Thursday. It’s going to be interesting.

It’s probably no coincidence that the indicator dropped after Obama stated one time too many that this is the worse economic situation since the Great Depression and he’ll have a plan to get us out of it after he returns from his extended vacation. That sounds much, to much, like the incompetent repairman who can’t seem to fix the problem you hired him for but is always coming up with future plans to do things he promised to do months ago.

Unfortunately for the economy, people’s plans to spend on cars – and the lift auto spending has given in the last month or so – reflects a fair amount of pent-up demand.

Supplies and availability for many popular Japanese models were interrupted by the tsunami, for one thing. Another factor is that people who put off buying things like cars because of the economy often cannot hold out forever. Their old car may be deteriorating or no longer meet family needs, for example.

Appliances are similar. You can put off buying a new stove, refrigerator, washer, or dryer as long as the old ones are working or can be reasonably repaired, but these things aren’t designed to work forever.

With confidence plunging, pent-up demand is the most logical explanation for increased sales or plans to buy bigger ticket items.

I’m neutral as to her potential run. That said, having worked on the staff of a sitting US Congressman and eying this strictly from a logistical standpoint, not having the infrastructure in place in key states at this point tells me she’s got a nearly impossible hurdle to navigate or she probably isn’t running. Since she seems a savvy politician, I suspect it to be the latter not the former.

Firearms sales continue to be very strong and they ARE a durable good!

As for the other durable goods expect the pattern for replacement to be… repair what you have, buy used, buy highly discounted models, buy at close-out sales from places going out of business, buy ultra-low end as cheap as you can get, buy on e-bay from overseas dealers that include shipping in the product cost… make do without.

The high end, high profit items? Lotsa luck there unless you are rich… and if you used to be able to afford it in 2006 and can’t now, you are not going to re-vote for any of the idiots Upon the Hill regardless of party. While people may not like the Tea Party message of living within your means, pay off your debts, save when you can, put away for a rainy day, put off until tomorrow what you really don’t need today… yeah that will always get high negatives. Common sense does until you are forced to use it by politicians. Then when you get a clue you look to vote out those without one. The cluebats were handed out in 2010. Expect more of them to start being distributed amongst the population at large while the Left denies that anything is wrong until THEY start to get put out of jobs from elite institutions.

If you want real change, then it is time to bring the pain of this economy home to the government and start putting large sections of it out of work so that the people can get breathing space to exercise their liberty and freedom. We are now in the school of hard knocks phase… help your fellow countrymen through it and hand them a cluebat, wouldya? We need more cluebat wielders now.